Oil, Gas Industries in Full Shutdown Mode

The offshore energy industry is in full shut-down mode. The federal government has reported that 77% of oil production and 36% of natural gas production in the Gulf of Mexico is now shut down. These figures are expected to rise again tomorrow as more offshore platform and pipelines close. According to the report, nearly one million barrels of daily oil production is now shut down. The last time this happened was in November 2005, after Hurricanes Katrina and Rita. In addition, 2.75 billion cubic feet of daily natural gas production is now shut down. The industry is closing up its offshore operations to prevent spills and evacuate its workers to safety. The industry can restart production within days of landfall, if there are no problems with pipelines and structures.

A critical question remains for energy markets: how much damage will Hurricane Gustav cause and how quickly will the industry be able to restart production in the gulf, which accounts for about 25% of U.S. oil production and 14% of gas production. In 2005, more than 50% of Gulf of Mexico production stayed out of service until early November, about 2½ months after Katrina’s landfall.